When it comes to budget revisions and program plans, I like to believe that it is rare that a grantee would intentionally misuse funds. However, without proper planning and documentation, an organization places itself at risk for misuse of funds.
Prevention of these undesirable outcomes starts at the beginning of the grant application and writing process. Organizations that carefully construct and review the budget delivered to the grantor, making certain that the budget is adequate and realistic in terms of meeting grant requirements will reduce the risk of misuse of federal funds.
But what do you do when things change after the budget is sent to your funding agency?
In this success tip from Decoding Grant Management, we’ll walk through how to handle changes in program plans and budget revisions with your federal grant.
Budget Revisions and Program Plans
Changes to program plans and budget revisions may require the prior approval of the funding agency. The specific requirements can vary, depending on the type of the award, and can be dependent on specific agency rules as well. The instances that follow usually require prior approval from the funding agency:
- Deviations from the budget and program plans
- Revisions to program plans and budgets
- Changes to the scope or objectives of the program or project
- Need for additional federal funds to complete the program or project
- Situations listed in the Cost Principles requiring prior approval from the funding agency
It is important that recipients fully understand situations requiring prior approval or they risk having costs disallowed.
How to Document Prior Approval for Budget Revisions and Program Plan Changes
In order for prior approvals (pre-approvals) to be effective, they must:
- Be in a written form
- Come from an authorized official at the funding agency
Of course, recipients should keep a record of the prior approval for future reference.
Specific Prior Approval Situations for Budget Revisions and Program Plans
A discussion of various situations requiring prior approval follows for each of these areas:
- Non-construction awards
- Construction awards
- Research awards
- Areas that are at the discretion of the federal awarding agency
In addition to the general requirements for prior approval, non-construction awards also require prior approval when Management-Success:
- Making changes to key personnel on the project or program
- The approved project director or principal investigator anticipates a reduction in the time allocated to the project. This reduction could be an absence exceeding three months or at least a 25% reduction in the time devoted to the project.
- Transferring funds between direct and indirect cost budgets
- Changes in the amount of cost-sharing or matching provided by the recipient.
- Transferring any funds budgeted for participant support costs to some other expense category. (Participant support costs are commonly referred to as “training allowances” and include such expenses as stipends, travel costs, and registration fees paid to participants in connection with conferences or training projects.)
- Making subawards, transferring or contracting of program work not identified in the original award application or addressed by the terms and conditions of the award. (Note that purchases of general types of support services, supplies, materials, or equipment are generally not considered contracting or transferring program work Management-Success.)
The Cost Principles in the Uniform Guidance provide additional instances requiring prior approval.
The awarding agency has the authority to waive some of the requirements for prior approval contained in the Cost Principles for your non-federal entity Management-Success.
If the federal award includes both construction and non-construction funds, recipients may not transfer the budget or funds between construction and non-construction activities without prior approval of the funding agency.
Research awards must follow the general requirements for prior approval in addition to the requirements for construction or non-construction awards, as applicable. However, research awards are allowed a special exception to the prior approval requirements in one special area Management-Success :
- Research awards can receive a one-time no-cost extension without prior approval unless prohibited by the terms and conditions of the award or unless other exceptions apply.
Agency Discretion for Budget Revisions and Program Plan Changes
Finally, the OMB Super Circular permits federal awarding agencies to waive certain cost and administrative requirements related to the timing of award expenditures and transferring funds between spending categories. Some examples of items for which the Federal awarding agency may waive prior approval for budget revisions and program plan changes including:
- Pre-award costs incurred up to ninety calendar days ahead of the award start date. (The recipient is still on the hook for the pre-spending if the non-federal entity doesn’t receive the award or if the award is less than anticipated.)
- Carrying forward unobligated balances to subsequent funding periods
- Restricting the transfer of funds and budget revisions between direct cost categories. (Federal agencies may restrict transfers if they equal more than 10% of the total budget and the total budget exceeds the current Simplified Acquisition Threshold of $150,000.)
Key Concepts for Budget Revisions and Program Plans:
In summary, prior approval is generally required for:
- Change in the scope of the program or project work
- Change in the objectives of the program or project
- Changes in the grant budget affecting the amount of federal funds needed to complete the project
- Items listed in 2 CFR Part 200 that require prior approval of the funding agency
The grant regulations do allow funding agencies some authority to waive certain prior approval requirements for grant recipients Management-Success.
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Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.